Centre for Eastern Studies NUMBER 219 | 21.07.2016 www.osw.waw.pl

Russia’s Greater Eurasia and ’s New : adaptation instead of competition

Marcin Kaczmarski, Witold Rodkiewicz

The argument that a crisis in Russian-Chinese relations is unavoidable has been repeatedly referred to by analysts since the 1990s. The reason for this crisis would be geopolitical com- petition between the two powers in . In 2013, China’s President Xi Jinping anno- unced the concept of the New Silk Road (referred to by the Chinese side as ‘One Belt, One Road’). At the same time, Moscow announced its efforts to build its own integration project in the form of the . These two developments seemed to confirm that the initial argument was correct and that the two projects were apparently fated to compete. Meanwhile, in May 2015, during President Xi Jinping’s visit to Moscow, a joint declaration was issued calling for combining the two projects and creating a formal mechanism for their co- ordination in the form of a joint task force. The vision of “a great Eurasian partnership” anno- unced by President Vladimir Putin during the International Economic Forum in St. Petersburg on 16–17 June 2016 – which he also referred to as the Greater Eurasia project – is a signal that Moscow has ultimately opted for the strategy of joining a stronger partner (bandwagoning) instead of choosing the strategy of counterbalancing the rising power of China. At the same time, Moscow is trying to conceal the growing asymmetry in Russian-Chinese relations.

The New Silk Road: region. More than 60 states have declared the- the Chinese vision for Eurasia ir participation in the project. The new concept is the outcome of the rising material potential The Chinese concept of the New Silk Road, which of China, which has become evident especially was presented for the first time by President after the global economic crisis in 2008–2009, Xi Jinping in the autumn of 2013, provides for of the growing confidence of Chinese elites and a construction of infrastructural connections be- of the search by China’s leader Xi Jinping for tween China and Europe, mainly in China’s ne- a unique formula for Chinese foreign policy. ighbourhood. Specific components of the New The New Silk Road reflects the Chinese vision Silk Road include: Central Asia (in the form of of the organisation of relationships in Eura- the Silk Road Economic Belt), South-Eastern and sia as broadly understood. The most impor- Southern Asia (in the form of the 21st century tant elements of this vision include: openness ) and Pakistan (in the form to potential participants, efforts to limit po- of the China-Pakistan Economic Corridor). The tential trade barriers and neutralise closed re- Chinese initiative also includes transit countries gional economic cooperation formats, as well and regions on the way to Europe, i.e. Russia, as attempts to devise an economic and de- Central and Eastern Europe, the Balkans, the velopment cooperation formula with smaller South Caucasus, Turkey and the states which would be an alternative to the

OSW COMMENTARY NUMBER 219 1 American concept. At the same time, using gional initiatives such as the Russian-controlled the initiatives carried out under the New Silk Eurasian Economic Union, which could form Road, China is striving to exert durable influ- a barrier to the Chinese economy, for example ence on states located in its neighbourhood. by establishing a customs union. In addition, This type of influence should be independent this approach is a method of ‘concealing’ Chi- of potential domestic changes in these states. na’s economic expansion and presenting it as a form of multilateralism and self-limiting of po- litical ambitions which potential partners could The aim of the New Silk Road project is to view as excessive. At the same time, the New facilitate China’s economic expansion and Silk Road remains a unilateral initiative, which to maintain the openness of external mar- so far has been shaped by the Chinese side, in kets to Chinese trade and investments. contrast to initial announcements. Moreover, Beijing is showing no particular readiness to define the rules governing the New Silk Road’s The New Silk Road remains a very broad con- activities more clearly. Instead, it limits itself to cept, with a framework which has been insti- issuing vague statements in which it refers to tutionalised to only a small degree. So far, only “mutually beneficial (win-win) cooperation”. mechanisms for funding the New Silk Road have The vague nature of the principles on which been created. A unilateral (i.e. Chinese-only) the Chinese concept is based seems to suggest New Silk Road Fund has been established, and that Beijing is only slightly interested in offi- a multilateral Asian Infrastructure Investment cial announcements by those states involved in Bank (AIIB) created as an additional tool to fund the project, in which they declared that they projects under the New Silk Road initiative. As would accept China’s leading role in the initi- a consequence, it can be expected that the New ative. Real economic benefits seem to matter Silk Road will serve the purposes of public di- much more. These mainly include maintaining plomacy and create the impression that Chinese the openness of external markets to China’s policy is multilateral. However, a major portion economic expansion and enabling the export of China’s activity will continue to be carried of production surplus and excess capital. For out within a flexible formula of bilateral rela- Beijing, the form in which its influence is exert- tions. Under the initiative of building the New ed seems to be much less important that the Silk Road, China is carrying out several invest- content of such influence. ment projects, mainly in the field of transport infrastructure (railways in Central Asian states, Russia’s response: Greater Eurasia seaports in South-) and energy infra- structure (power plants in Pakistan). Over the Russia has interpreted the launch of the New last three years, most loans granted by Chinese Silk Road project as a declaration that Chi- state-controlled banks have been allocated to na is intensifying its economic penetration participants in the New Silk Road project. of Central Asia1. Since at least the end of the This formula of the New Silk Road reflects the 1990s, Moscow has been observing China’s functional understanding by Chinese elites of rising economic influence in this region with the question of influence. From Beijing’s per- concern. There were fears that Beijing might spective, the initiative is intended to facilitate economic expansion and help keep external 1 For more on China’s economic penetration of Central Asia, markets open to Chinese trade and investments. see Aleksandra Jarosiewicz, Krzysztof Strachota, ‘China vs. It is also expected to help bypass certain re- Central Asia. The achievements of the past two decades’, OSW Studies no. 45 (2013), especially chart 1, p. 57.

OSW COMMENTARY NUMBER 219 2 want to use this influence to challenge Rus- the lowering of tariffs, and ultimately the crea- sia’s status as a regional hegemon. Russia’s tion of a free trade zone3. economic integration projects, which it has Above all, the new project is intended to create been dynamically implementing since 2011 the impression that it is Moscow that is taking (the Customs Union, the Common Econom- the initiative in Russian-Chinese relations, and ic Space, the Eurasian Economic Union), were thereby to conceal and legitimise the growing intended to stop this trend, among other asymmetry in bilateral relations. Secondly, the things. This is why initially Moscow was re- idea of Greater Eurasia – similar to the previ- luctant to accept the new Chinese initiative2. ous idea of ‘Greater Europe’4 – is intended to be a propaganda instrument to persuade Western Europe to develop cooperation with Russia on The Greater Eurasia project is intended to Russia’s terms. conceal and legitimise the growing asym- metry in Russian-Chinese relations. The origin of the project The Greater Eurasia project was devised at a point when the Kremlin began to face fun- However, at a summit in Shanghai in May 2014, damental challenges. Some of these challeng- Russia and China issued a joint statement in es (including the halt of Russia’s economic which they declared their readiness to launch growth) came as a consequence of the global talks on synchronising their economic coop- economic slowdown and the lack of domes- eration projects: the Eurasian Economic Un- tic reforms. However, other challenges result- ion (EaEU) and the New Silk Road. At the 2015 ed from Russia’s revisionist policy towards the summit a separate declaration on cooperation West which it has pursued at least since 2007 between the two initiatives was adopted. Dur- (the significant speech by President Putin at ing this year’s International Economic Forum the Munich security conference). Russia’s at- in St. Petersburg (16–17 June), at the Shanghai tempt to expand the Eurasian project to include Cooperation Organisation summit in Tashkent Ukraine, made as part of this policy, has led to (24 June) and during his visit to China (25 June), a confrontation with the United States and with President Vladimir Putin proposed a new vision the , and ultimately caused of economic cooperation in Eurasia: a “great a limitation of Russia’s access to Western loans Eurasian partnership” which he also referred to and technologies. At the same time, the rising as “Greater Eurasia”. It would involve the crea- of China has lead to an asym- tion of a network of bi- and multilateral trade metry in Moscow’s relations with Beijing, which agreements between the Eurasian Economic began to become increasingly evident in 2015. Union, China, member states of the Shanghai

Cooperation Organisation and ASEAN, as well 3 http://www.kremlin.ru/events/president/news/50864; as the European Union. Initially, these agree- http://kremlin.ru/events/president/news/52178\ 4 The concept of ‘Greater Europe’ was proposed by Pres- ments would involve the simplification and uni- ident Boris Yeltsin in 1996 and continued by President fication of regulations regarding cooperation Vladimir Putin. It involved the creation of a geopolitical Russia–Europe bloc composed of two elements: the Eu- in specific areas and in investments, as well as ropean Union and the bloc of Eastern European states of technical, phytosanitary and customs regu- dominated by Russia. The concept of Greater Europe also provided for the breaking of trans-Atlantic ties and lations and regulations concerning intellectual creating a ‘complementary’ partnership between Russia property. Later, the agreements would involve and Europe, to enable Russia to gain access to Western European capital and technologies without the need to adopt European standards. See Marek Menkiszak, 2 See Rossiysko-kitayskiy dialog: model 2016 (ed.) I.S. Iva- Greater Europe. Putin’s Vision of European (Dis)integra- nov, (Doklad RSMD, #25/2016), p. 41-42. tion, OSW Studies, no. 46, 2013.

OSW COMMENTARY NUMBER 219 3 Despite the Kremlin’s disappointment at the entitled “Towards the great Ocean – 3. The cre- insufficient scope of China’s economic assis- ation of Central Eurasia”7, they called for “the tance offered to Russia when the latter became transformation of Central Eurasia into a zone of detached from Western financial markets due joint development” by combining the Chinese to its confrontation with its geopolitical oppo- New Silk Road initiative with the Russian pro- nent, Moscow was forced to make a series of ject of Eurasian economic integration. The goal major concessions. These included the export would be to avoid geopolitical rivalry between to China of armaments systems of a higher lev- the two projects and to create a mechanism el of advancement than before, which poten- fostering Russian-Chinese interaction in Central tially could change the balance of power in the Asia according to the rules of a “non-zero sum Pacific region (S-400 air defence systems and game”. This type of interaction should be based Su-35 fighter jets); the opening of the Russian on the shared interest of Moscow and Beijing market to Chinese investments, including al- in stabilising the Central Asian states and elim- lowing Chinese companies to operate in the inating “political interference by non-regional energy sector as co-owners of deposits5, and [read: American] forces”. The core of this struc- indirect support for the Chinese stance in the ture should be the common creation of a trans- territorial dispute over the South China Sea6. port infrastructure connecting China with Eu- ropean markets via Central Asia and Russia. The report contained a proposal for the states in- Focused on building economic influence, volved in the project to create a joint “high-lev- Beijing’s policy limits the potential rival- el committee” on cooperation in the develop- ry between Russia and China, and paves ment of transport-logistics corridors and the the way for harmonising the projects that implementation of development projects. The both powers have devised for Eurasia. report contained recommendations regarding the launch of a ‘Central Eurasia Dialogue’ be- tween the EaEU, China and the remaining states The intellectual background of the Greater Eur- of the region to serve as a political umbrella asia project was formulated by a group of ex- protecting the project. In the further perspec- perts working, most probably on commission tive, the authors of the report proposed “the from the Russian government, under the aegis creation of a community (or a union) of cooper- of the Valdai Club. The group’s work was pre- ation, stable growth and security for the whole sided over by Sergei Karaganov and Timofey of Eurasia, which would stretch not only to the Bordachev. In a report prepared in April 2015, East, but also to the western ends of Eurasia”8.

7 http://iwep.kz/files/attachments/article/2015-04-21/ 5 The process by which Chinese companies entered the Rus- doklad_sozdanie_evrazii_ekonomicheskiy_poyas sian energy sector was rather lengthy. For example, in Jan- _shelkovogo_puti.pdf; http://russiancouncil.ru/inner/?id_ uary 2014 the Chinese state-controlled company CNPC pur- 4=5710#top-content chased 20% of shares in the Yamal LNG gas project, and in 8 See K velikomu Okeanu - 3. Sozdaniye Tsentralnoy Yevrazii. March 2016 it purchased an additional 9.9% of the shares. Analiticheskiy doklad Mezhdunarodnogo Diskussionogo In December 2015, the Chinese company Sinopec purchased kluba “Valdai” (kratkaya versiya), p. 4, 12, 13, 20, 21. The a 10% stock package in the Russian petrochemical company report did not mention the term Greater Eurasia. It was used Sibur. In June 2016, the Russian regulator approved the sale for the first time by Sergei Karaganov in the interview “Ki- of a 13.3% stock package in the company Norilskyi Nikel to tayskii veter duyet v nashy parusa” in Rossiyskaya Gazeta, Chinese investors. 1 June 2016. In autumn 2015 it began to be used by Pu- 6 See the statement by Russia’s Foreign Minister Sergei tin’s close associates, for example Sergei Naryshkin and Lavrov on 12 April 2016; http://www.mid.ru/press_ser- Igor Sechin, see W. Petrov, Bolshaya Yevraziya, Rossiyskaya vice/minister_speeches/-/asset_publisher/7OvQR5K- Gazeta, 7 October 2015, M. Melnikov, Rosneft’ mechtayet JWVmR/content/id/2227965; and the joint declaration sogret’ Yevropu v obyatiyakh, Russkaya Planeta, 23 October by the leaders of China and Russia (25 June 2016) http:// 2015, http://rusplt.ru/world/rosneft-mechtaet-sogret-evro- kremlin.ru/supplement/5100. pu-v-obyyatiyah-19376.html

OSW COMMENTARY NUMBER 219 4 An escape into the future our revolution’ (of which the Kremlin has long The new vision of geo-economic order pro- suspected Washington). Moreover, Beijing has posed by the Kremlin is mainly intended to cre- demonstrated its readiness to work out a ge- ate the impression, albeit false, that Russia is opolitical compromise in Central Asia, which the initiator of the new economic order which would require China to combine its dominance is emerging in Eurasia and that, due to its role in the sphere of the economy with respect for as an essential intermediary in contacts with Russia’s interests in the sphere of politics and Asian markets, it can impose certain conditions security. Experts associated with the Kremlin of mutual cooperation on the European Union. seem to believe that the Chinese political tradi- tion – unlike the Western one – “does not pro- vide for expansion with the use of force and for The concept of Greater Eurasia is a propa- basing [its foreign policy – WR] on hard pow- ganda tool intended to persuade Western er”9. These assumptions exclude the policy of Europe to develop cooperation with Rus- geopolitical balancing in Russia’s relations with sia on Moscow’s conditions. China, although they do not exclude efforts to strengthen Russia’s position versus China by way of diversifying the economic ties. At the same time, it serves as an ideological screen intended to conceal the Kremlin’s ac- The project’s target recipients ceptance of the growing asymmetry in Russia’s Beijing is the first target recipient of the Greater relations with China. This asymmetry is becom- Eurasia project. The sense of Putin’s offer to Bei- ing evident in both the economic and the polit- jing seems to be Russia’s consent to cooperation ical sphere. In a more practical dimension, the with China in the implementation of Beijing’s rhetoric of the Greater Eurasia concept is in- strategy involving economic expansion west- tended to conceal Moscow’s de facto abandon- ward, albeit only on condition that China takes ment of its attempts to block China’s economic Russian interests into account. These interests expansion in Central Asia and Russia’s consent mainly include maintaining the institutional co- to a condominium in the region. herence of the Eurasian project and postponing Several fundamental assumptions which the the question of liberalisation of trade in goods. Russian authorities (and President Putin him- The Russian offer also includes tacit approval self) apply in their policy towards China pro- for a Russian-Chinese condominium in Central vide an important background for the project Asia, which involves Russia’s dominance in the devised by the Kremlin. Firstly, Russia cannot sphere of politics and security and China’s dom- afford to become involved in an open conflict inance in the sphere of the economy. with China, because the cost of such a conflict

would be immense. Secondly, for Russia the 9 Strategiya dlya Rossiyi. Rossiyskaya vneshnaya politika: policy pursued by Washington poses a greater konets 2010-kh-nachalo 2020-kh godov (2016), p. 4. A policy document prepared under the supervision of threat than the policy pursued by Beijing, and Sergei Karaganov by a team of experts and diplomats a possible Pax Sinica would be more suitable for similar to the one which prepared the report “K veli- komu Okeanu”. There are many more similar quotes. For Russia than a Pax Americana. From the point example, the text prepared in 2010 under the supervi- of view of the authorities in the Kremlin, the sion of another key expert associated with the Kremlin, Vyacheslav Nikonov, directly states: “It should howev- most important point is that, unlike Washing- er be understood that direct diktat and dominance are ton, Beijing does not intend to change the sys- absent from the Chinese tradition”; Tikhookenskaya strategiya Rossii, p. 6. It is difficult to say whether these tem of governance in Russia by way of a ‘col- assessments are manifestations of ‘wishful thinking’ or ‘putting a brave face’.

OSW COMMENTARY NUMBER 219 5 Other target recipients of the project are the sense of Putin’s offer is to invite Asian partners key EU states, mainly Germany, France and It- – India, Iran, ASEAN, – to join the aly. In this case, the vision of Greater Eurasia is Russian strategy of making an ever-stronger to serve the same purpose which Moscow in- China an element of an increasingly complex tended to achieve when promoting the Greater network of multilateral economic and political Europe project. This purpose involved Russia’s institutions which will limit Beijing’s potential ‘temptation’ of Western Europe with the pros- to use its advantage in bilateral relations. pect of economic cooperation with the East and peaceful coexistence with Russia, which will ul- The consequences for Russian-Chinese timately lead to Western Europe’s ‘emancipa- relations tion’ from the American strategic umbrella and the West’s consent to asymmetric economic Unlike Russia’s Greater Eurasia project, China’s cooperation on Russia’s terms. The vision of the New Silk Road is a manifestation of a drive to- Russian market, or even the post-Soviet mar- wards globalisation, rather than the regional- ket, proved insufficiently attractive to convince isation of international politics. This approach Western Europe to strike a geopolitical deal. has several consequences for Chinese-Russian relations. Firstly, China treats Russia, and po- tentially also the Eurasian Economic Union, Moscow chose to adapt to China’s grow- as one of the corridors of the New Silk Road, ing influence in Central Asia rather than one which offers the shortest route while at counterbalance it. the same time being a unified customs area. Secondly, China aims to prevent the EaEU from becoming a barrier to China’s economic Therefore, Putin is now trying to achieve the presence in the post-Soviet area. This would same result by presenting the Europeans be likely if the customs union provided for in with a vision of Asian markets and suggest- the EaEU treaty were implemented and specif- ing that they could significantly increase their ic economic policies were grouped under one presence on these markets if they cooperat- coordination mechanism. At the same time, ed with Russia. On the other hand, this offer China does not, at least for the time being, in- contains elements of blackmail which threat- tend to assume political leadership in Eurasia ens Europe with economic and political mar- and is ready to share the responsibility with ginalisation, should Europe decide not to take other actors (except for the United States). advantage of the benefits of Russian ‘media- This policy as pursued by Beijing limits the tion’. From Russia’s perspective, the offer it potential rivalry between Russia and China in extended to Western Europe is an attempt to the post-Soviet area, and paves the way for avoid Moscow’s excessive economic depend- harmonising the projects that both China and ence on China10. Russia have devised for Eurasia. Other target recipients of Putin’s project are The Russian vision of Greater Eurasia is not an Asian states, as potential participants in the attempt to block the Chinese New Silk Road economic ‘cooperation network’. The implied project. On the contrary, the Russian project represents indirect consent to the Chinese vi- 10 The authors of the concept of Greater Eurasia directly sion of economic cooperation in Eurasia, one state: “[Russia’s] economic turn eastwards… is not tan- in which specific economic blocs do not pursue tamount to Russia turning its back on Europe in eco- nomic terms or swapping its unilateral dependence on a protectionist and limited policy. At the same European markets for an equally unilateral dependence time, this vision enables the Kremlin to main- on China”. K velikomu Okeanu - 3., p. 4.

OSW COMMENTARY NUMBER 219 6 tain an appearance that it retains the political a barrier to cooperation. Similarly, it should not initiative in its neighbourhood and is shaping be expected that China will strive to make the the policy together with Beijing. Shanghai Cooperation Organisation the main For Beijing, the future framework of China’s co- forum for coordinating cooperation between operation with the EaEU is not a matter of key the New Silk Road and the EaEU, due to China’s importance. The EaEU’s potential is not signif- reluctant approach towards institutionalisation icant enough to make the lack of a free trade and the weak results of the economic coopera- zone (which is what China officially supports) tion achieved so far within this format.

EDITORS: Adam Eberhardt, Marek Menkiszak Centre for Eastern Studies Anna Łabuszewska, Katarzyna Kazimierska Koszykowa 6a, 00-564 Warsaw TRANSLATION: Magdalena Klimowicz phone: +48 | 22 | 525 80 00 Co-operation: Jim Todd e-mail: [email protected] DTP: Bohdan Wędrychowski The views expressed by the authors of the papers do not Visit our website: www.osw.waw.pl necessarily reflect the opinion of Polish authorities

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